Question 1

 
Titanic Sdn Bhd has more than 10 years experience in production and trading machine
power booster, device X in Malaysia market. The company’s accountant has presented
some relevant management accounting information about the business in 2019 and 2020
as below:
 
2019:
The company’s market share in Malaysia was 15%. There were twenty companies
including Titanic Sdn Bhd in production and trading machine power booster in Malaysia.
Only four licensed suppliers were selling relevant materials for the production of machine
power boosters. Based on the company’s financial records, 40% of the customers who
have above 5 consecutive years repeat business transactions. The Production Director
declared that there was no potential substitute of machine power boosters in the current
market
2020:
The company’s turnover and the total turnover in Malaysia are RM30 millions and RM250
millions respectively. There were two new machine power booster manufacturers that
entered into the Malaysia market. Due to non-compliance of legal expectation, only three
licensed suppliers were selling relevant materials for the production of machine power
boosters. Based on the company’s customers list, there were 100 customers who have
above 5 consecutive years repeat business transactions out of the total 400 customers. The
Marketing Director informed that the new energy saving devices were being promoted in
2020.
Required:
(i) Based on porter five forces, indicate all relevant information for 2020 as given in the table below:
  2019 2020
Competition in the industry:    
Market share ratio  
= turnover of the company/total turnover in the market 15%
 

Potential of new entrants into the industry: 20 companies  

Number of competitors
Bargaining power of suppliers: 4 suppliers  
Number of licensed suppliers in Malaysia
Bargaining power of customers:    
Proportion of loyal customers = number of customers with  
above 5 consecutive yearly repeat business transactions/ 40%
total number of customers

Threat of substitute product: Nil  

 
(ii)Based on the results in (a)(i) above, evaluate the performance of Titanic Sdn Bhd.

 
Due to the adverse results as indicated in (a)(i) above, the management of Titanic Sdn Bhd
plans to conduct an urgent meeting. You are required to propose matters to be considered in
analysing the company’s performance so that the management is able to identify strategies to
lead the business in attaining desired future performance.

INTI International College Subang

Past Semester Exam Question
January 2021 Session
Suggested answers for Question 1 (a) (i)
Porter’s five forces evaluation
  2019 2020
Competition in the industry:    
Market share ratio   RM30m/RM250m x
= turnover of the company/total turnover in the market 15% 100%
  = 12% √√
Potential of new entrants into the industry: 20 companies (20 existing
Number of competitors competitors + 2 new
competitors) =
22 competitors √√

Bargaining power of suppliers: 4 suppliers 3 suppliers √

Number of licensed suppliers in Malaysia
Bargaining power of customers:    
Proportion of loyal customers = number of customers with   100 customers / 400
above 5 consecutive yearly repeat business transactions/ total 40% customers x 100%
number of customers = 25% √√
Threat of substitute product: Nil New energy saving
Types of substitute product devices √
Suggested answers for Question 1 (a) (ii)
Students may provide the following comments or any other justifiable comments on the performance
of Titanic Sdn Bhd.
(i) In 2020, the market share of Titanic Sdn Bhd decreased by 3%. Such reduction of market share
could be due to entrance of two new machine power booster competitors and new entrance of
substitute products providers.
(ii)There two new machine power booster competitors entered the market, it indicated that the level of
rivalry in the market became even harsher than before.
(iii)There are lesser-licensed materials suppliers due to one of the suppliers failed to meet legal
requirements. Such reduction to only 3 suppliers will strengthen the bargaining power of suppliers.
(iv)Further information is required in order to interpret the results on reduction of proportion of loyal
customers in 2020. If such proportion of loyal customers is reduced due to increase in number of
new customers, it will be interpreted as positive performance or else it will be a sign of negative
performance.
(v)The new substitute product was introduced to the market will provide greater options to customers.
The management of Titanic Sdn Bhd needs to be alert and reponse positively on the progress
technologies changes in the market.
Suggested answers for Question 1 (b)
Students may provide the following points or any other justifiable points on matters to be considered
in analysing the company’s performance so that the management able to identify strategies to lead
the business in attaining desired future performance.

  Marks
(i) It is important to identify the total Malaysia market turnover in 2019, so that the 1
management is able to compare the quantum of demand in 2019 and 2020.  
When the result shows that the Malaysia demand is increased in 2020, the 1
management requires to identify such increase is due to new market development  
or expansion in the existing market.  
When the result shows that the Malaysia demand is decreased in 2020, the  
management needs to identify the company is losing in which existing market. 1
Other than market share ratio, the management should identify major competitors  
in the market; sensitive to response on the competitors’ current pricing, marketing  
and promotion strategies; and any differences features between the company and 1
the competitors’ machine power boosters.
 
ii. The company’s management should identify those major market leaders of machine power booster and  
conduct the company’s SWOT analyse, so that the management able to choose suitable generic strategies 1
to compete and survive in the market.  
The company’s management needs to be alert on the marketing strategies adopted by the major  
competitors, so that the management manage to reposition its business in order counter act on the  
competitors’ marketing strategies effectively. 1
The management must observe the impact of the two competitors newly entered into the market, so that the  
company can defend the market against the new competitors attack.  1
iii. The management requires in reviewing the purchase price of materials from its suppliers so that the  
management can assess the impact on the production input cost as the number of suppliers is reduced. 1
If the materials supplier who lost the licensed is one of the company’s existing materials suppliers, the  
management must take immediate action to contact the other three licensed suppliers as replacement in  
suppliers of materials. 1
If the materials supplier who lost the licensed is one of the company’s existing materials suppliers, the  
management have to reassess any negative impact on the company’s existing machine power booster  
devise X reputation. 1
The company also need to understand the reasons of the materials supplier who lost the license in 2020, so  
that the management will be more alert to deal in getting quality materials that comply with the legal  
requirement in future. 1
The management may consider the possibility in forming unique alliance with a materials supplier in order  
to secure sole supply. However, costs and benefits evaluation on such alliances should be considered. 1
iv. The 2019 detailed total number of customers and total number of customers  
with above 5 consecutive yearly repeat business transactions should be 1
identified in order to have better appraisal and comparison with the 2020  
customer based records.  
The management should segregate different categories of customers in order to  
have more detailed assessment on the sales performance in each different 1
category of customers.  
It is important to understand different expectation in different categories of  
customers, so that the management able to provide competitive services / 1
products to different customers in this dynamic business environment.  
Other than the evaluation on the company’s number of customers, the  
management should consider in selecting effective channel in provision of 1
products and services to customers; and allow customers to have easy access to
the company support on after sales services.
 
v. The company’s management should be sensitive in the changes of the  
technologies in the market. The management needs to study whether the 1
current trend for machine in obtaining energy saving is more costs  
effective than machine in getting power booster?  
The company’s management also must keep track on the latest compliance  
rules imposed by the country, so that the company can take responsive 1
action to modify the direction of the company in provision of either both
machine power booster and machine energy saving devise or only machine
energy saving in future.